The Government Takes a Tin Mine

Readers:

There has been a good deal of international interest over the past week in the action by the Morales government on February 9th to “nationalize” the Swiss-owned Bolivian Vinto tin mine. It is the latest episode dealing with the intention of the government to recover Bolivia’s resources for the country, and what effect that will have on foreign investment.

The Vinto mine issue is not one that The Democracy Center has researched (as opposed to gas nationalization, for example) so we haven’t written on it. However, for those readers interested, here is an article on the issue written by a Bolivia-based correspondent for The Economist, which seems like a fair discussion of the issues.

Jim Shultz

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TIN SOLDIERS

Feb 15th 2007 LA PAZ From The Economist print edition

The article can be found here

The political vendetta behind another nationalisation

IT IS becoming a familiar ritual. On February 9th Evo Morales, Bolivia's socialist president, flanked by troops, stood in front of the Vinto tin smelter and declared it nationalised. Last May he did the same to his country's natural-gas industry. In October he said it was the turn of mining. Yet with Mr Morales, whose rallying cry is “Bolivian resources for the Bolivian people”, sometimes the symbolism and the rhetoric is more ambitious than the reality.

So it was with natural gas, where he later signed new, tougher contracts with multinationals. The threat to nationalise mining quickly changed to a proposal to raise taxes on private mining companies. And even that was watered down after 20,000 members of mining co-operatives marched on La Paz earlier this month.

Vinto, officials claim, is a special case. “It's about righting a wrong,” says Guillermo Dalence, the mining minister. “The plant was taken from the Bolivian people fraudulently and we are reclaiming it.”

The smelter has a controversial history. Built by a military government, it was privatised in 1999. The buyer was Allied Deals, a British outfit later liquidated after its directors were charged with fraud over an unrelated scam in the metals market.

Goni is a hate figure in Bolivia today. That is partly because 67 people were killed when he called out the army against the protests in 2003. The government is backing moves to extradite him from the United States to face a trial which the former president's lawyers say is politically motivated. But Goni is also hated because he oversaw the privatisations that Mr Morales is now trying to reverse.

In 2005 Goni sold Comsur's Bolivian assets (which included several mines) to Glencore, a mining company based in Switzerland. The price was not disclosed, but it was said to be $220m, of which $90m was said to be for the smelter. According to one well-placed source, a side-letter required Comsur to repay Glencore in the case of nationalisation.

Since the world tin price was very low when Vinto was privatised, and the smelter had lost money in state hands, it is far from clear that Bolivia was swindled. The tin price has since risen sharply, reaching its highest level since 1985 this week. So in addition to targeting Goni, the nationalisation may boost government revenues.

Glencore is demanding compensation for the smelter. It says the seizure violates a 1991 bilateral investment treaty between Bolivia and Switzerland. The government says it, too, will seek compensation in any international arbitration. It claims that Glencore did not register the purchase in Bolivia and, somewhat improbably, that the smelter was worth $140m when it was privatised. “All foreign companies that operate within the legal framework have our guarantee that they won't be touched,” says Mr Dalence. Investors may not be wholly reassured.